I've noticed something about most cyclists since I've been cycle commuting across Bristol.
Most cyclists aren't dedicated road cyclists, in fact, they are just trying to get from place to place. I've noticed a surprising amount of people driving to the outskirts of the city before cycling the remaining distance to the centre. I've also noticed a lot of people riding dutch style step through bikes.
I can't work out why small wheels haven't caught on. They are far less cumbersome than 700c, so much easier to put in your car. They are much easier to store (in an office, at home or at cycle racks). Obviously, I've seen a few Bromptons around, but they retail at around £1000 and weigh a silly amount due to the folding.
The only disadvantage I can see is they don't give such a comfortable ride, which could be very easily solved by rubber dampers.
Moulton came up with this design in the 60's, I'm struggling to work out why it hasn't caught on for city commuter cyclists (which make up a surprisingly large portion of cyclists).
I'd certainly find a small wheel bike much easier for when I drive halfway and cycle half way on my commute...